Textile sector records marginal growth despite subsidies worth billions

Subsidies worth billions of rupees to the textile sector have not been able to enhance the pace of growth, as textile sector recorded a negligible growth rate of 0.53% in the first quarter (July-September) of 2007-08 over the same period last year.

The slow pace of growth is the outcome of the two subsequent negative tends in textile exports - 0.79% in September 2007, 5.55% in August 2007 - excluding July 2007, where a marginal growth was recorded. Official figures showed that the value of total textile exports reached $2.812 billion in the first quarter as against $2.797 billion in the corresponding period last year.

While the Government paid Rs. 23.5 billion cash subsidies under the head of so-called 6% research and development subsidies to the industry since April 2005 to August 2007 to help it build its capacity to compete with India, Bangladesh, China. However, the average growth of textile sector during the last two years remained around 4%. Analysts suggested that Government will have to revisit its policy of cash subsidy as it did not increase the export of various textile commodities. It is also evident from the Government figures that expansion in the existing textile units or installation of new textile units has been missing in the last two years.

Some of the textile tycoons have started making huge investment in other profitable sectors, like sugar, cement, power generation, etc. Analysts said that the Government is violating rules as subsidies never used for research and development in the textile sector during the last two-and-a-half years. Share of banking in short and long term loans in the textile sector also witnessed a steady decline during the last three years.

The Minister further said that changing of duty drawback regime also made the textile manufacturers less competitive. The market access is also a big issue as other countries, like Bangladesh, Sri Lanka and India, were enjoying preferential market access for their products as compared to Pakistan.